Finance Minister announces ‘war on cash’ to tackle tax evasion

Federal Minister for Finance Muhammad Aurangzeb on Sunday announced the government’s “war on cash” to maximize revenue potential and tap into Rs9.3 trillion cash reserves.

Short-term challenges ahead

• The deadline for filing taxes “may be extended,” although the head of FBR disputes any such plan
• Aurangzeb believes that most citizens will continue to experience short-term suffering
• Insists that firms are currently benefiting from macroeconomic gains

The “short-term pain” of recent policy measures will persist for the majority of citizens, Mr. Aurangzeb said at a press conference, even as top firms start to reap the benefits of emerging macroeconomic improvements.

Rashid Mehmood Langrial, the chairman of the FBR, accompanied the finance minister to the conference and attempted to dispel the “myth” surrounding the much-discussed Rs2.7tr taxes that are pending litigation. Rather, he developed the storyline about a possible “Rs7.1tr tax gap” that needs to be found using technology and extensive auditing.

The head of FBR said that there would be no more extensions to the tax return submission deadline than September 30. Strong rumors circulated, nevertheless, suggesting that an extension would be granted for a few days following the final date.

According to the minister, Pakistan’s GDP might be worth twice as much as the current estimate of $325 billion, or over $700 billion, and this would result in yearly tax evasion of over Rs7 trillion. He declared, “As we move forward, we will ensure this documentation.”

In his words, these tax evaders would not be allowed to buy cars and real estate, invest in mutual funds, create bank accounts, take out cash, or even deal with deposits.

Aurangzeb went on to say that there will be an interface that guarantees the transparency of disclosed revenues and sources, shielding citizens from harassment by tax authorities. “We will now properly use this lifestyle data to boost the tax-to-GDP ratio, even though it is already available,” he stated.

As of September 29, he stated, the number of tax filings had more than doubled to 3.2 million from 1.6 million the year before, with over 723,000 new filers as opposed to 300,000 the year before. “This demonstrates that we are living up to our words,” he remarked.

As a result of declining inflation, the central bank recently lowered its policy rate by 450 basis points, which allowed businesses and the industry to borrow money at the essentially negative Karachi Interbank Offered Rate (Kibor), or between 15 and 16 percent interest as opposed to the policy rate of 17.5 percent.

Speaking about the ongoing tax cases totaling Rs2.7 trillion, Langrial stated that roughly Rs2.1 trillion of them were procedural in nature, filed by tax authorities in opposition to rulings made by appellate forums, and that recovery of the remaining amount was less considering the success percentage of FBR cases.